Lord Clement-Jones: I thank the Minister for that reply. It would be difficult to impute sinister motives to her, given such a reply. Nevertheless, the drafting of the schedule is interesting. If we simply took it at face value, we might ask why that paragraph should exist in the first place. If the Select Committees have the power to insist on the production of papers and peopletheir general powerwhy is the schedule drafted in that way?

I am sure that the Government do not have sinister motives, but they may have signposting motives. They may wish to indicate that that is how they think a Select Committee should operate. In a way, that is almost as unhelpful as a sinister motive. It should be expected that the regulator should appear regularly in person before the Health Select Committee to describe his policies.

I am half-satisfied by the Minister. I never would have thought that there would be any sinister motives in the Department of Health, but I do not believe that the paragraph signposts as well as it should do the kind of relationship that the regulator should have with the Health Select Committee. We may pick the matter up at a later stage, but, in the mean time, I beg leave to withdraw the amendment.

Amendment, by leave, withdrawn.

Lord Clement-Jones moved Amendment No. 109:

Page 115, line 4, at end insert

"Right of appeal to regulator

Employers of health service staff in non-foundation trusts affected by decisions made by foundation trusts in respect of their terms and conditions of employment may ask the regulator to judge if these are a breach of section 26 of the Health Act 1999 (c. 8) (co-operation between NHS bodies), as amended by this Act."

The noble Lord said: In describing the model, as he likes to call it, in the Bill, the Minister says increasingly frequently that it is not the job of the foundation hospital to do something that is proposed from parliamentary Benches or that it is not the job of the regulator to do something else. That is a circular argument. One of the problems that we have with the Bill is the mindset that the regulator should do ", Y and Z and that any amendment that tries to extend the scope of his functions is illegitimate. That is not the

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most constructive may to proceed with the Bill, particularly if some of the anxieties about the impact of foundations hospitals are to be allayed.

I am interested by the mantra that the Minister is beginning to use. He says that it is a case of "referee versus inspector". That reminds me of how, during the passage of previous health Bills, the noble Lord, Lord Hunt of Kings Heath, assured us that the system was a managed system, not a regulated system, and that those systems were completely counterposed. What happened in the end? That was in response to wanting to merge the functions of CHAI

Lord Hunt of Kings Heath: The point is that we managed the system so well that we were able to evolve and move on to a regulated system. It is a serious point. By setting up institutions such as NICE, the national service frameworks and CHAI, we have created the conditions in which it is possible to move to a decentralised, regulated system, rather than a managed one. However, we must start with management.

Lord Clement-Jones: I think back on the number of times that the noble Lord talked about how strong performance management in the NHS was and how important it was. Clearly, we are moving away from performance management because of the enormous success that the noble Lord and his colleagues have had over the years.

That is backdrop. In this context, one of the key fears of those who have doubts about foundation trusts is that they will be able to poach staff by improving pay and conditions for staff to a level above those of other hospitals in the area. It is not yet clear what pay flexibility will be available to foundation trusts, and it is hard to see what additional freedoms trusts might require over and above those in Agenda for Change. Many of us welcome the fact that the general broad approach will be that foundation trusts will be expected to implement Agenda for Change, which already offers significant new pay flexibility to all NHS organisations, including an ability to increase pay rates by up to 30 per cent in each organisation to tackle problems with recruitment and retention. It is important that trusts exercise such freedoms with proper regard to the wider local health economy.

The amendment is designed to add weight to Clause 29, which imposes on foundation trusts a duty under the Health Act 1999 to co-operate with other NHS bodies. It would help ensure that the creation of foundation trusts strengthened rather than undermined relationships between hospitals and other NHS organisations. I beg to move.

Earl Howe: The noble Lord's amendment is grouped with my Amendment No. 199, which brings us face to face with the duty of co-operation in Clause 29. As regards the practical operation of the clause, many services are dependent on collaboration between NHS trusts and are provided in hospitals where the skills of the staff are appropriate to the complexity of the disease. That is particularly important, for example, in

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the treatment of cancer. Some hospitals are designated cancer centres covering the more complex cancers; other hospitals are designated as cancer units providing care for the more common cancers. What is essential is that hospitals are integrated into a network so that patients are referred to a place with the right expertise. That is a fundamental principle which transcends the interests of individual NHS organisations.

The cancer policy framework document, published in 1995, states:

"Great importance is also attached to the integration of the work of the Cancer Units with the Cancer Centre. This can only be achieved by strong links for all the professions, common treatment policies, audit arrangements and participation in trials".

The recent study by Eurocare revealed that five-year cancer survival rates in Britain are below the European average. If foundation trusts are literally free to provide the kind of services which suit their own interests as trusts instead of what fits in best with local hospitals, there will be a serious risk for patients. Providing the right care in the right place cannot be left to chance. Patients must know that it is there for them.

That means that bodies which currently participate in clinical networks must continue to co-operate to co-ordinate both care and capacity. One answer would be to build these arrangements into a contract. Without a legally binding contract, there is no mechanism for resolving disputes between a PCT and a foundation trust in respect of specialised services. The current provision is very vague and could not be relied upon to back up a demand by a PCT that a foundation trust falls in with a joint commissioning arrangement.

Another route is that suggested in the amendment whereby the regulator becomes the arbiter of any dispute involving a lack of co-operation by a foundation trust. Whichever direction this issue takes, it is too important to be ignored. I should like to hear the Minister's answers to the concerns raised by the noble Lord, Lord Clement-Jones and myself, if, over the long term, clinical networks are to remain the mechanism by which specialised services are delivered by the NHS.

Baroness Finlay of Llandaff: Noble Lords have highlighted the tremendous importance of partnership in the provision of high quality services. Indeed, it is in cancer par excellence that that is demonstrated. For example, the number of patients requiring upper gastro-intestinal cancer surgery each year is small, which means that patients need to be concentrated in order to develop a centre of expertise. Over the years, there has been a great deal of evidence that hospitals performing one or two oesophagectomies per annum have much worse results than those performing a critical number with an experienced team around them.

Currently, there are partnership agreements in place. What assurances are there that these partnership agreements will remain in place and will be respected? So far, I am not clear how bad co-operation must be for it to be deemed non-co-operation and to

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cause the regulator to intervene. I am uncertain, too, at what point the national clinical director will be consulted for opinions about the quality of service and whether developments within a foundation trust may jeopardise the quality of service in other parts of the NHS within a clinical network.

4.15 p.m.

Lord Warner: I shall respond to the two different issues in respect of the two amendments. As regards Amendment No. 109, I enjoyed the exchange between the noble Lord, Lord Clement-Jones, and my noble friend Lord Hunt, who, as is often the case on these occasions, almost took the words out of my mouth. I do not want to disappoint the noble Lord, Lord Clement-Jones, by not using one of my mantras. This is an appropriate point at which to use my mantra about flexibility. He knows that it is our belief that NHS foundation trusts should have a degree of flexibility on staff pay and conditions, just as NHS trusts do now. The important point is that it is also our strong belief that employment contracts are a matter for staff, their unions and the employers. They are not issues which should be arbitrated upon by a third party, such as the regulator.

However, it is essential that NHS foundation trusts do not act in ways that are inconsistent with equal pay principles and that they do not prejudice the interests of the wider NHS, including other NHS employers. Quite frankly, a beggar-your-neighbour policy on pay among NHS bodies serves no one's interests, including anyone who started along that path. The balance between freedom for staff, their unions and the employers to negotiate what is right for them, flexibility for NHS foundation trusts and looking after the interests of the wider NHS is precisely what we will achieve in the current arrangements that will apply to NHS foundation trusts.

As the noble Lord acknowledged, first, NHS foundation trusts will implement the new Agenda for Change pay system. The Secretary of State will not support applications from NHS trusts without a clear commitment to implement Agenda for Change. Under the new pay system, NHS foundation trusts will be specifically represented in forums for national collective bargaining on staff terms and conditions of service. That will be a contractual right for all Agenda for Change staff. These national negotiations are a matter for employers and unions, and not for the Secretary of State.

Secondly, national negotiations and terms and conditions of employment are notI emphasise, are nota matter for the independent regulator either. The amendment would drag the independent regulator into those sets of arrangements. He does not and should not have the power to intervene in the contracts agreed between NHS foundation trusts and their staff. Effectively, that is what the amendment would do.

However, we recognise that safeguards need to be in place to ensure that the employment policies of individual NHS organisations are not detrimental to the NHS as a whole. That is why NHS foundation

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trusts will be subject to the same duty of partnership that applies to all NHS bodies; namely, a duty to co-operate in the exercise of their functions, as set out in Clause 29. Any persistent attempt at disregarding neighbouring partners would bring a foundation trust into breach of this partnership requirement.

An NHS foundation trust would be able to increase pay rates only if it were able to generate enough efficiency savings to offset higher costs. We shall probably turn to this issue at a later stage, but all NHS organisations will be bound by a new national tariff for NHS services. Foundation trusts will not be able simply to increase charges to NHS commissioners to cover the costs of an increased wages bill. There are reasonable checks and balances that make the amendment unnecessary. Most inappropriately, if agreed, it would drag the regulator into the field of industrial relations, where he or she does not belong.

The arguments are rather different in relation to Amendment No. 199. I do not disagree with some of the sentiments expressed by the noble Earl, Lord Howe, and the noble Baroness, Lady Finlay, about integrating care for patients, especially in the area of cancer. Nothing in the Bill damages the capacity of individual health professionals to work together to integrate care for patients.

It may be helpful to noble Lords if I give some indication of what the duty of partnership really means. Good partnership working for NHS foundation trusts will involve consultation with PCTs on service development and expanding capacity in line with commissioning requirements, participating in the training and education of the NHS workforce, working together with workforce development confederations and universities to ensure effective co-ordination, as well as working across clinical networks to deliver services along integrated care pathways. Every NHS foundation trust will be under a statutory duty to work in partnership with its neighbours and others involved in that kind of work.

We do not think that anything set out in the Bill would in any way damage those clinical networks and pathways towards integrated care that large numbers of health professionals now deliver day in and day out. It is not the purpose of this Bill to disrupt those activities. Many of those relationships are very much the result of health professionals working together. All we have done in the Bill is to set up an organisational framework which will ensure that partnership working continues in a way beneficial to patients.

The independent regulator has the responsibility of overseeing NHS foundation trusts, including their compliance with statutory obligations. Under Clause 3, he must act in the best interests of the wider NHS, not only NHS foundation trusts. Under Clause 6(3) the regulator can set any terms to an authorisation that he considers appropriate and, under Clause 29, has powers of intervention which he can exercise where an NHS foundation trust significantly fails to meet its statutory obligations. Therefore the independent regulator could issue an NHS foundation trust with

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warning notices or, in extremis, even replace managers if that trust persistently continued to act in a way contrary to its statutory obligations.

We believe that adequate safeguards have been put in place in this legislation to ensure that a clear signal is given about the importance of partnership working and that enforcement mechanisms will be made available to the regulator, should the need arise.